H & M Hennes & Mauritz AB

Transcription

1 Six-month report (1 Dec 31 May ) H & M Hennes & Mauritz AB Six-month report First half-year (1 December 31 May ) The H&M group s sales including VAT increased by 7 percent in local currencies during the first six months of the financial year. Converted into SEK, sales including VAT increased by 5 percent to SEK 104,965 m (100,024). Sales excluding VAT amounted to SEK 90,565 m (86,143). Profit after financial items amounted to SEK 10,329 m (13,158). The group s profit after tax amounted to SEK 7,902 m (10,066), corresponding to SEK 4.77 (6.08) per share. Second quarter (1 March 31 May ) The H&M group s sales including VAT increased by 5 percent in local currencies during the second quarter. Converted into SEK, sales including VAT increased by 2 percent to SEK 54,341 m (53,233). Sales excluding VAT amounted to SEK 46,874 m (45,867). Gross profit amounted to SEK 26,980 m (27,245). This corresponds to a gross margin of 57.6 percent (59.4). Profit after financial items amounted to SEK 7,002 m (8,435). The group s profit after tax amounted to SEK 5,357 m (6,453), corresponding to SEK 3.24 (3.90) per share. Profits in the second quarter were negatively affected mostly by higher purchasing costs due to the strengthened US dollar and by increased markdowns. Continued very satisfactory development for H&M s e-commerce. Successful launch of H&M s e-commerce in nine countries during the quarter: in Slovenia, Croatia, Estonia, Latvia, Lithuania, Luxembourg, Ireland, Japan and Greece. First half-year SEK 105 billion Sales incl VAT 4,077 stores in 62 markets H&M s e-commerce will be launched in Canada and South Korea during autumn. A total of 11 new H&M online markets will thus be added in which means that H&M will offer e- commerce in 34 markets by the end of the year. A continued fast roll-out of new H&M online markets is planned for The H&M group s sales including VAT in the period 1-21 June increased by 7 percent in local currencies compared to the same period last year. The H&M group plans a net addition of around 425 new stores for the / financial year. New markets for are Puerto Rico, which has opened this June, and New Zealand and Cyprus which will open during the autumn. In 2017, H&M plans to open stores in four to five new markets of which Colombia will be one. SEK m Net sales 46,874 45,867 90,565 86,143 Gross profit 26,980 27,245 49,679 49,458 gross margin, % Operating profit 6,952 8,352 10,222 12,989 operating margin, % Net financial items Profit after financial items 7,002 8,435 10,329 13,158 Tax -1,645-1,982-2,427-3,092 Profit for the period 5,357 6,453 7,902 10,066 H&M Ladies Earnings per share, SEK

2 Six-month report (1 Dec - 31 May ) Comments by Karl-Johan Persson, CEO Sales including VAT in the second quarter amounted to SEK 54 billion and profit before tax to SEK 7 billion. In local currencies, sales increased by 5 percent. The sales increase in March and April was significantly below our plan. These two months were negatively affected by cold spring weather in many of our markets. In May, sales were much better with an increase of 9 percent, or 11 percent when adjusted for calendar effects. Profits in the second quarter have been affected by a continued negative US dollar effect, but also by increased markdowns and the costs of our long-term investments. The fact that the sales increase in the quarter was below plan, naturally also had an impact on profits. It has been a challenging half-year for fashion retail in many markets, but we have great confidence going forward and are continuing to develop our offering further within all our brands. The combination of strong brands, a large body of retail stores in good locations and a successful e-commerce business puts us in a unique market position for future growth. Although e-commerce is growing fast, there is still great potential for the H&M group to continue to expand through physical stores so for us, our continued focus is to grow both through physical stores and online, as well as to integrate these two sales channels. Our stores and online business complement each other well, and the key to the future is to continue to integrate these channels even further to make it as convenient and easy as possible for our customers. So far this year we have opened nine new online markets, which means that we now offer H&M s e-commerce in 32 markets including Japan and Greece, where we recently successfully launched our e-commerce. A further two new online markets will open during the autumn: Canada and South Korea. And in 2017 we will continue the rapid rollout of H&M s online shop to further markets. Today we have more than 4,000 stores in strong retail locations in a total of 62 markets. We are signing very favourable store leases and this year we plan a net addition of approximately 425 stores. New markets this year are Puerto Rico, where we had a successful opening in San Juan in June, and also New Zealand and Cyprus, where we will open in the autumn. Next year we plan to open four or five new H&M markets, of which Colombia will be one. Our work on sustainability is an important part of our offering. For six years in a row H&M has been named by Ethisphere as one of the most ethical companies in the world. We have now climbed to 20th place in the ranking of the world s most sustainable companies, and according to the Global 100 index we are the no. 1 company in our sector. H&M is also included in the Dow Jones Sustainability Index of the most sustainable companies in Europe and the world. H&M Kids We have opened nine new online markets during the second quarter. Today our customers can shop online at H&M in 32 markets. 2

3 Six-month report (1 Dec - 31 May ) Sales With continued strong expansion, the H&M group continued to gain market share in many markets. The fashion retail industry was still characterised by a challenging macroeconomic situation in many countries. The H&M group s sales in local currencies including VAT increased by 5 percent in the second quarter and by 7 percent in the half-year period. SEK m incl VAT 125, ,000 75,000 50,000 25,000 53, % 54, % 100, ,965 0 H&M Man Sales including VAT converted into SEK increased by 2 percent to SEK 54,341 m (53,233) in the second quarter. Sales including VAT in the half-year period increased by 5 percent and amounted to SEK 104,965 m (100,024). Sales excluding VAT increased by 2 percent to SEK 46,874 m (45,867) in the second quarter and by 5 percent to SEK 90,565 m (86,143) in the half-year period. Sales in March and April were negatively affected by cold spring weather in many markets, which meant that sales in these two months were significantly below the company s plan. Sales development was significantly better in May with an increase of 9 percent, or 11 percent, when adjusted for calendar effects. The difference between the sales increase in SEK and in local currencies is due to the fact that the Swedish krona has strengthened against most sales currencies in the group compared to the same period last year. Currency translation effects arise when sales and profits in local currencies are translated into the company s reporting currency, which is SEK. A negative currency translation effect arises when the Swedish krona strengthens and a positive currency translation effect arises when the Swedish krona weakens. Sales in top ten markets, six months Change in % 31 May - 16 SEK m inc. VAT SEK m inc. VAT SEK Local currency Number of stores New stores (net) Germany 18,093 18, USA 12,800 11, UK 7,271 7, France 6,325 6, China 5,110 5, Sweden 4,837 4, Italy 4,264 4, Netherlands 3,771 3, Spain 3,676 3, Switzerland 3,014 3, Others* 35,804 31, , Total 104, , , * Of which franchises 2,393 2,

4 Six-month report (1 Dec - 31 May ) Gross profit and gross margin H&M s gross profit and gross margin are a result of many different factors, internal as well as external, and are mostly affected by the decisions that H&M takes in line with its strategy to always have the best customer offering in each individual market based on the combination of fashion, quality, price and sustainability. Gross profit SEK m 60,000 50,000 40, % 54.9% 49,458 49,679 30,000 20, % 57.6% 27,245 26,980 10,000 H&M Home 0 Gross profit amounted to SEK 26,980 m (27,245) in the second quarter, corresponding to a gross margin of 57.6 percent (59.4). For the first half-year, gross profit increased to SEK 49,679 m (49,458), corresponding to a gross margin of 54.9 percent (57.4). Markdowns in relation to sales increased by 0.9 percentage points in the second quarter compared to the corresponding quarter in. The increase is mostly explained by the fact that the spring garments did not sell as well as planned due to unfavourable weather in many of the group s important sales markets, particularly during March and April. Overall, the market situation as regards external factors such as cost inflation and purchasing currencies continued to be negative during the purchasing period for the second quarter compared to the corresponding purchasing period in the previous year, mostly due to the impact of the stronger US dollar on purchasing costs. The negative US dollar effect, which has affected purchasing costs unfavourably for a long time, will also negatively impact purchasing costs for the third quarter. If today s exchange rates remain, the dollar effect could have a neutral effect on purchasing costs for the fourth quarter compared to the corresponding quarter the previous year. 4

5 Six-month report (1 Dec - 31 May ) Selling and administrative expenses SEK m 50,000 40, % 30,000 36,469 39,457 20, % 10,000 18,893 20,028 0 Cost control in the group remains good. For the second quarter of, selling and administrative expenses increased by 6 percent in SEK and by 8 percent in local currencies compared to the second quarter last year. The increase is mainly due to the expansion and the long-term investments within IT and online. Profit after financial items SEK m 20,000 H&M Ladies 15,000-22% 10,000 5,000 8,435-17% 7,002 13,158 10,329 0 Profit after financial items in the first half-year amounted to SEK 10,329 m (13,158). Profit after financial items in the second quarter amounted to SEK 7,002 m (8,435), a decrease of 17 percent. Profits in the quarter were affected by a continued negative dollar effect on purchasing costs, but also by increased markdowns and the costs of long-term investments which increased by SEK 100 m in the quarter compared to the same quarter last year. The fact that sales did not reach the company s sales target for the quarter naturally also had a negative impact on profits. 5

6 Six-month report (1 Dec - 31 May ) Stock-in-trade SEK m 30,000 25,000 20,000 15,000 10,000 5, % 25,339 19, May Stock-in-trade amounted to SEK 25,339 m (19,699), an increase of 29 percent in SEK and 31 percent in local currencies compared to the same time the previous year. The increase in the stock-in-trade is explained by the group s expansion through stores and online, and also by the strengthening of the US dollar which affected purchasing costs and thus the value of the stock. The increase is also related to a bookkeeping effect of more than SEK 1 billion associated with the previously communicated change in the administrative process for invoices relating to goods purchasing for the H&M group. In addition, the increase is explained by the fact that sales in the quarter were below plan and this has led to higher stock-in-trade than planned at the end of the quarter. The stock-in-trade amounted to 13.7 percent (11.8) of sales excluding VAT rolling twelve months and 30.2 percent (26.9) of total assets. COS Expansion The H&M group remains positive as regards future expansion and the group s business opportunities. The strong expansion continues both through stores and online. The group s growth target remains intact. The aim is to increase the number of stores by percent per year with continued high profitability. For full-year the group plans a net addition of around 425 new stores, with most of the expansion taking place in existing markets. China and the US will once again be the markets with the most new stores. H&M stores represent the largest part of the group s planned net addition of 425 new stores. Of the group s other brands COS, Monki, Weekday, & Other Stories and Cheap Monday the main focus of expansion in will be on COS. H&M Home will also continue its rapid expansion, with around 80 new H&M Home departments. H&M Home is now available in a total of 224 H&M stores in 42 markets. Expansion Brand Store Online New markets H&M Store: Puerto Rico*, New Zealand, Cyprus Online: Slovenia*, Croatia*, Estonia*, Latvia*, Lithuania*, Luxembourg*, Ireland*, Japan*, Greece*, Canada, South Korea COS Store: Czech Republic*, Romania*, Latvia, Malaysia, Saudi Arabia Monki Store: Austria Weekday 6 18 Store: Austria*, Belgium & Other Stories Store: Ireland, Poland Cheap Monday * Opened Number of markets 22 Jun - 6

7 Six-month report (1 Dec - 31 May ) Store count by brand In the first-half year, the group opened 184 (149) stores and closed 31 (21) stores, i.e. a net increase of 153 (128) new stores. The group had 4,077 (3,639) stores as of 31 May, of which 171 were franchise stores. New Stores (net) Total No of stores Brand 31 May - 31 May - H&M ,730 3,370 COS Monki Weekday & Other Stories Cheap Monday Total ,077 3,639 Store count by region New Stores (net) Total No of stores Region 31 May - 31 May - Europe & Africa ,774 2,612 Asia & Oceania North & South America Total ,077 3,639 H&M Sport Tax The H&M group s tax rate is expected to be approximately percent for the / financial year. In the first and second quarter of an estimated tax rate of 23.5 percent has been used which will also be used for the third quarter. The final outcome of the tax rate depends on the results of the group s various companies and the corporate tax rates in each country. Current quarter The H&M group s sales including VAT in the period 1-21 June increased by 7 percent in local currencies compared to the same period last year. Sales so far in June should be seen in the light of the fact that June was a strong month with a sales increase of 14 percent in local currencies. Accounting principles The group applies International Financial Reporting Standards (IFRS) as adopted by the EU. This report has been prepared according to IAS 34 Interim Financial Reporting as well as the Swedish Annual Accounts Act. The accounting principles and calculation methods applied in this report are unchanged from those used in the preparation of the annual report and consolidated financial statements for 2014/ which are described in Note 1 Accounting principles. H & M Hennes & Mauritz AB s financial instruments consist of accounts receivable, other receivables, cash and cash equivalents, accounts payable, accrued trade payables, interest-bearing securities and currency derivatives. Currency derivatives are measured at fair value based on input data corresponding to level 2 of IFRS 13. Other financial assets and liabilities have short terms. It is therefore judged that the fair values of these financial instruments are approximately equal to their book values. The parent company applies the Swedish Annual Accounts Act and the Swedish Financial Reporting Board s recommendation RFR 2 Accounting for Legal Entities, which 7

8 Six-month report (1 Dec - 31 May ) essentially involves applying IFRS. In accordance with RFR 2, the parent company does not apply IAS 39 to the measurement of financial instruments; nor does it capitalise development expenditure. For definitions see the Annual Report. Risks and uncertainties A number of factors may affect H&M s results and business. Many of these can be dealt with through internal routines, while certain others are affected more by external influences. There are risks and uncertainties related to fashion, weather conditions, negative macroeconomic changes, geopolitical risks, sustainability and external factors in production countries, trade interventions, foreign currency and tax but also in connection with expansion into new markets, the launch of new concepts, changes in consumer behaviour and how the brand is managed. There are also some risks related to the group s reputation, so called reputational risks. For a more detailed description of risks and uncertainties, refer to the administration report and to note 2 in the annual report and consolidated accounts for. Calendar 30 September, Nine-month report, 1 Dec 31 August 31 January, 2017 Full-year report, 1 Dec 30 November This six-month report has not been audited by the company s auditors. Stockholm, 21 June Board of Directors 8

9 Six-month report (1 Dec - 31 May ) The undersigned hereby provide an assurance that the half-year report for 1 December 31 May provides a true and fair view of the parent company s and the group s business, positions and earnings, and also describe the significant risks and uncertainties faced by the companies making up the group. Stockholm 21 June, Stefan Persson Stina Bergfors Anders Dahlvig Chairman of the Board Board member Board member Ingrid Godin Lena Patriksson Keller Melker Schörling Board member Board member Board member Christian Sievert Margareta Welinder Erica Wiking Häger Board member Board member Board member Niklas Zennström Board member Karl-Johan Persson Chief Executive Officer Information in this interim report is that which H & M Hennes & Mauritz AB (publ) is required to disclose under Sweden s Securities Market Act. It will be released for publication at 8.00 (CET) on 22 June. This interim report and other information about H&M, is available at Contact Nils Vinge, IR Karl-Johan Persson, CEO Jyrki Tervonen, CFO (switchboard) (switchboard) Invitation to press and telephone conference in conjunction to the six-month report is available on hm.com. H & M Hennes & Mauritz AB (publ) SE Stockholm Phone: , Fax: , Registered office: Stockholm, Reg. No H & M Hennes & Mauritz AB (publ) was founded in Sweden in 1947 and is quoted on Nasdaq Stockholm. The company s business idea is to offer fashion and quality at the best price in a sustainable way. In addition to H&M, the group includes the brands COS, Monki, Weekday, Cheap Monday, & Other Stories as well as H&M Home. The H&M group has more than 4,000 stores in 62 markets including franchise markets. In, sales including VAT amounted to SEK 210 billion and the number of employees was more than 148,000. For further information, visit 9

17 Six-month report (1 Dec 31 May ) PARENT COMPANY INCOME STATEMENT (SEK m) 1 Dec Nov External sales excluding VAT Internal sales excluding VAT* ,857 1,646 3,605 GROSS PROFIT ,857 1,648 3,620 Selling expenses Administrative expenses OPERATING PROFIT ,753 1,591 3,494 Dividend from subsidiaries 1, ,425 1,310 13,288 Interest income and similar items** Interest expense PROFIT AFTER FINANCIAL ITEMS 2,314 1,609 3,225 2,916 16,929 Year-end appropriations Tax PROFIT FOR THE PERIOD 2,118 1,437 2,829 2,563 16,140 * Internal sales in the quarter consists of royalty of SEK 958 m (880) and other SEK 1 m (0) received from group companies and for the six-month period of royalty of SEK 1,854 m (1,646) and other SEK 3 m (0). * Interest income and similar items in the quarter consists of SEK 3 m (8) in interest income and SEK -19 m (0) in translation effects from group companies and in the six-month period of SEK 5 m (17) in interest income and SEK 42 m (0) in translation effects from group companies. PARENT COMPANY STATEMENT OF COMPREHENSIVE INCOME (SEK m) 1 Dec Nov PROFIT FOR THE PERIOD 2,118 1,437 2,829 2,563 16,140 Other comprehensive income Items that have not been and will not be reclassified to profit or loss Remeasurement of defined benefit pension plans Tax related to the above remeasurement OTHER COMPREHENSIVE INCOME TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 2,118 1,437 2,829 2,563 16,169 17

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